A> Many of the demand forecasting challenges listed below are symptomatic of forecast driven planning in general, it is just that the scale of the current issue has thrown light on the problem. The following issues are always a problem with any forecast-driven model:
- Short-term & medium-term demand forecasting > impact on lifecycle
- Foresight / early warning on relaxation of lockdowns & return of demand
- Impact of border closures causing feast & famine of materials
- Balance reducing finance vs. healthy inventory for 6-month lead times
- Risk of forecasting more than 3 months ahead…not able to predict bullwhips
- Reliability of demand with long lead times
- Preparing for recovery, exit plan under uncertainty
- Increasing demand; constrained supply & threat of protectionism
Our suggested approach…
If you follow the O8 Strategy / Condition / Execute DDMRPII model, the supply chain planning and execution process is clearly segmented, uses the right relevant information for each activity in the supply chain and resolves these issues.
A forecast is good for setting up the supply chain, not executing it. The further out you drive execution the more unreliable that signal is. So stop doing it! Forecast is not used at all to manage the execution time horizon. As a result, you automatically release salespeople from the near term forecast horizon.
We implement buffers with a demand-driven replenishment process where appropriate. This allows a clear definition of the supply chain set up and the ability to model different scenarios.
O8’s DDMRPII includes buffer setting as part of a holistic S&OP planning approach: Conditioning – this ensures you have clear control and visibility of the planning strategy used and the setup implication of that approach.
Scenarios can be modeled and approved.
DDMRPII Buffers are automatically sized to cope with different lead times and act as decoupling points, eliminating the bullwhip. They also integrate with delivery constraints and life cycle plans. Hard phase In/Out and soft transitions can be seamlessly managed. Demand fluctuations will, of course, alter timings but the system will cope autonomously.
In a constrained supply situation, product can be directed to the place with the most urgent need through clear identification of end-market demand and buffer penetration levels.
DDMRPII allows prioritization visibility right through a network so you don’t lose visibility as you would in a standard DDMRP set up whilst also eliminating exception messages and the noise-driven from MRP which makes it impossible to plan.
As demand picks up it will automatically drive replenishment to the markets and products that start moving first. You don’t have to guess.
So take control of your supply chain set up – decouple sourcing and replenishment from the forecast, minimize the risk on long lead time items by taking the right decision at the right time, have a clear supply chain plan integrating stock and responsiveness against which you can make clear decisions, integrate LCP into the plan and take back control.
O8’s DDMRPII delivers all this, and can be implemented in 90 days. We are so sure of the results we offer a ROI guarantee even with a virtual implementation. You can learn more here